Starbucks (SBUX) Goes To China

Starbucks (NASDAQ:SBUX) wants to follow Wal-Mart (NYSE:WMT), McDonald’s (NYSE:MCD), Dell (NADSAQ:DELL) and hundreds of other large American companies into China. It is the promised land for consumer spending. The middle class in the world’s most populous nation is growing at an extraordinary rate, even with a modest slowdown in its rapidly rising GDP.

Wang Jinlong, the head of the coffee company on the mainland told Reuters, “It’s absolutely very, very important. This has really become our second home market.” Based on the leveling off of Starbucks business in America, the strategy may be obvious.

Howard Schultz, the CEO of the company, has said he foresees the day that his company will have thousands of stores in China. The comment is not unlike one made by his predecessor when he said the coffee company would eventually have 40,000 locations around the world. Starbucks never got close, and now it has closed some stores in America.

No one knows whether the Chinese are intersted in expensive coffee. Starbucks will find that out as it goes along opening store after store until it is clear that latte sells in the communist country or it does not. It is usually dangerous to brag about success before the fact. Schultz, Starbuck’s founder, should have learned that the last time the company trumpeted it coming success.

Douglas A. McIntyre